JUST three months ago, everyone thought Cable & Wireless Worldwide was a busted flush. After de-merging from the C&W mobile business in 2010, it was forced to make three profit warnings and went through the same number of chief executives. A roster of impressive blue-chip clients couldn’t hide the fact it lacked the scale and strategic vision needed to recover.
Then we entered the carcass phase. Bidders started to evaluate CWW not on its day-to-day business selling communications services to corporates, but rather on the prize asset it had buried in the back garden: a 20,000km fibre optic broadband network. Its shares, languishing at 19.8p in February, surged by over 90 per cent.
It is primarily for this network – not the company’s client base or its people – that Vodafone has agreed to pay £1bn. The mobile giant, which is dealing with a surge in 3G traffic, will be able to offload some of this onto the CWW fibre network rather than paying the likes of BT hundreds of millions to piggyback on their pipes. It will also beef up its existing offering to big corporates by offering them so-called unified communications solutions – a mixture of fixed-line and mobile services.
This carcass phase is something we’re increasingly seeing with once great technology companies, firms who were pioneers but who have failed to keep pace with newer rivals. It suggests that some of the laggards of the tech world deserve to be reassessed, not on their chances of staging a comeback but on the treasure they have got hidden away.
When Google agreed to pay Motorola Mobility for $12.5bn (£7.7bn), it had very little interest in the company’s main business as a handset manufacturer. If the web giant had wanted to develop its own mobile phone, it would have gone after a more successful firm like Taiwan’s HTC. Instead it wants Motorola Mobility for its patents, allowing it to compete in the so-called patent wars against Apple.
So what of the other technology companies who are struggling. Could they too be worth another look? Nokia, which was once the undeniable king of mobile phones, has had a torrid time of late, marked by a string of profit warnings and no obvious route back to good health. Yet many analysts believe that its own patents – it has at least 10,000 – are worth much more than its €10.5bn market value.
Blackberry has lost 75 per cent of its value over the last year, but it too has some prize assets: a massive corporate client base and the best keyboard in the mobile business, which is of course protected by patents. Kodak might be technically bankrupt, but it values its own patent portfolio at $2.6bn. Yahoo is approaching irrelevance, but as one of the first major web firms its intellectual property must be incredibly valuable.
These titans of technology might be nearing the end – but they could be worth more dead than alive.